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Fitch study notes increase in mortgage arrears

Arrears reached a new high of 18.4% in the first quarter of 2014, Fitch figures show

Irish mortgage loans in arrears by more than three months continue to increase, according to new data from the Fitch rating agency.

Fitch said that arrears reached a new high of 18.4% of the current balance in the first quarter of 2014, up from 16.7% a year earlier. It said this was mainly due to the increase of arrears in the buy-to-let sector.

The housing market here has seen significant increases over the past year, which has been driven mainly by demand for properties in Dublin. Home prices have risen 8.1% over the past year and the peak-to-trough fall now stands at 46.7%.

Fitch also noted signs that lenders are becoming more willing to consider taking properties into possession.

"As the legal process becomes more certain, lenders have begun to selectively enforce their security over properties. However, it is clearly still the last resort as the number of cases remains extremely low, especially relative to the amount of distress in the market," commented Andrew Currie, Managing Director at Fitch's Structured Finance team.

Ireland has experienced significant home price increases over the past year, which has been driven primarily by demand for properties in Dublin. Home prices have risen 8.1% over the past year and the peak-to-current correction now stands at 46.7%.

Fitch said it expects banks to negotiate partial loan write-downs for selected borrowers, with the intention of making them sustainably affordable. "Lenders will retain the right to recover the full loan amount in the event that property values rebound sufficiently in the long term," it added.